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Discuss the role of purchasing function in cost control and value implementation for a business. Include examples to illustrate your answers Essay Example

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Discuss the role of purchasing function in cost control and value implementation for a business. Include examples to illustrate your answers

ATMI is one organization that has eye on the long terms objectives but with tools in place to respond to changes in the short term. It is able to give value by aggressively managing risks, analysing markets and feeding the entire system short term changes needed in the long term plans.Success in the purchasing function appreciates the need for sourcing strategically and purchasing tactically. Value can be unlocked out of the purchasing function by focussing on strategic sourcing and building of deeper relationships with suppliers. Organising practising best practices such as FMC have a dedicated team of employees closely managing their suppliers. Merck derives value from the procurement department by strategically organising the department into three expertise centres i., direct material, research and mew markets. Employees who are located in different regions execute the purchasing function tactically and closely manage their suppliers.Value can be derived through the purchasing function by segmentation of suppliers. Merck has segmented its suppliers into three distinct layers so as to partner with strategic suppliers in delivering results to the whole organisation (Taylor, 2003). The company uses three criterions to classify their suppliers. Firstly a supplier’s value to Merck is very important and in fact contributes to the company’s strategy. Secondly a supplier is tiered depending on the amount of money Merck spends with the particular suppliers. Supplier preferencing is another very important factor and on this end, Merck evaluates if the particular sees them as a strategic partner when deciding on how to segment. Segmentation of suppliers is also based on portfolio analysis where the company determines whether a supplier is a strategic one or a just a commodity (KPMG, 2012).The value aspect of supplier segmentation may not necessarily be perceived in terms of cost cutting; supplier value instead can be measured on the basis of amount of innovation they are providing to the business. At Merck for instance, suppliers placed in the top most tier, are accorded the most in terms of focus and value management. The company will regularly meet with these suppliers, set KPIs and constantly review them so as to harness as much value as possible. Most organisations are today using a pyramid structure to segment their suppliers and accord them the kind of relationship management

Works Cited

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1. Clara, C., & John, R. “Control and synergies in the outsourced supply chain.” Lund: Lund University. 2005.

2. Chung Jiang Yue Tian and Susanne Hertz Lianguang Cui. “Problems and Challenges of Global Sourcing: A Study og Chinese Manufacturing Enterprises.”JonKoping International Business School, 2009. Available at: http://hj.diva-portal.org/smash/get/diva2:318924/FULLTEXT01.pdf

3. Cook, T. A. “Global Sourcing Logistics: How to Manage Risk and Gain Competitive Advantage in a Worldwide Marketplace.” AMACOM, 2006.

4. Fan, X. “Purchasing in the Whole World under the Mode of Management of Supply Chain.” Journal of Hubei Correspondence University, 2007.

5. James M. Mose, James Njihia and Peterson Magutu. “The Critical Success Factors and Challenges of E-Procurement Adoption Among Large Scale Manufacturers in Nairobi Kenya.” European Scientific Journal, 2013. Available at: https://profiles.uonbi.ac.ke/njihia/files/the_critical_success_factors_and_challenges_in_e-procurement_adoption_among_large_scale_manufacturing_firms_in_nair

6. Jan Telgen and Corina Pop Sitar. “Possible Kinds of Values Added by the Purchasing Department.” (2001). Available at: http://doc.utwente.nl/42595/1/ValuesAddedByPD.pdf

7. KPMG. “Supplier Category Management: Driving Value Through the Procurement Organization.” KPMG, (2012). Available at: http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/supplier-category-management.pdf

8. Monczka, R. M., Trent, R. J., & Petersen, K. J. (2008, Mar). “Getting onTtract to Better Global Sourcing.” Supply Chain Management Review, 1-46.

9. Riku Santala and Samuli Syrjanen. “Spend Management: Key Elements for Realising Cost Savings In Procurement.” Bearing Point Management & Technology Consultants, 2010. Available at: http://www.bearingpoint.com/en-ie/download/Spend_Mgmt_WP_FI_8p.pdf

10. Taylor, T. K. “The Proper Use of Offsets in International Procurement.” Journal of Public Procurement, 2003: 3(3): 338-356.

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preview essay on Discuss the role of purchasing function in cost control and value implementation for a business. Include examples to illustrate your answers
  • Pages: 9 (2250 words)
  • Document Type: Assignment
  • Subject: Professional
  • Level: High School
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